00:00Pauline, it's great to have you with us.
00:01So let's talk about the different categories here.
00:04As Romaine mentioned,
00:05when you take a look at fashion, leather goods,
00:07that didn't look so great, but then you...
00:10If you take a look, for example,
00:11at watches and jewelry, a bit of a bright spot here.
00:15Reported sales increases of about 7% and 8%.
00:19What do you make...
00:20of that mix?
00:21What does that say about the consumer?
00:24Well...
00:25First of all, it says less about the market
00:27than it does about the fact that LVMH has...
00:30a very diversified portfolio that the...
00:33where it saw some growth, particularly...
00:35in watches and jewelry,
00:36is where it saw particular stagnation about a year earlier.
00:40So it was anniversary-ing off of a very soft comp.
00:43Um...
00:45And the fact that the consumer,
00:47who is already showing a lot of reluctance to spend...
00:50in the top dollar for fashion,
00:51recognizes the inherent value in very expensive watches and...
00:55jewelry, simply because as investment pieces,
00:57they hold their own in a way that clothes...
01:00shoes and bags do not.
01:01So the consumer is being rational.
01:03Um...
01:04And, uh...
01:05LVMH is having to balance a pretty diversified portfolio...
01:08which has a lot of headwinds.
01:10Uh...
01:11And at any given time,
01:12we'll have a little bit of tailwind as well,
01:13which is what we saw here.
01:14I think that's...
01:15so interesting,
01:16the point that...
01:17I mean, you think about jewelry,
01:18you think about watches,
01:19it sounds like you're...
01:20you're saying that,
01:21uh, you know,
01:22the luxury buyers looking at those,
01:23uh, pieces more as...
01:25investments,
01:26can you think of past periods where that has been true?
01:29Because there is that...
01:30you're saying out there that,
01:31you know,
01:32luxury,
01:33it typically doesn't crack.
01:34It's not, sort of,
01:35as immune...
01:35to some of the macroeconomic forces,
01:37as other parts of retail.
01:39But still, this...
01:40shift is interesting.
01:41It is.
01:42It is.
01:43I mean,
01:44there's a few things that are...
01:45happening that are,
01:46uh,
01:47making any historical comparison,
01:48not quite,
01:49uh, relevant...
01:50here.
01:51One of them is that the gap in pricing,
01:53between very high-end fashion and...
01:55uh,
01:56watches and jewelry has closed.
01:57So,
01:58it was always more expensive to...
02:00buy a diamond necklace than it was to buy a nightgown,
02:03uh,
02:04or an evening gown.
02:05And...
02:06but if you look at the,
02:07uh,
02:08the inflation that...
02:09several of the brands...
02:10and several of those within the LVMH portfolio...
02:12have,
02:13uh,
02:13enjoyed in years where...
02:15um,
02:16the...
02:17the consumers seem pretty invincible
02:18and pretty,
02:19um,
02:20price insensitive.
02:20And then they got to a point where the consumer said no more.
02:23And,
02:24uh,
02:25when it comes to watches and jewelry...
02:25they've been much more stable in how they've treated their prices...
02:27Yeah.
02:28...combined with the fact,
02:29uh,
02:30that the...
02:30the price of gold and some of the,
02:31the,
02:32um,
02:33the,
02:34the products that are going into those...
02:35finished pieces...
02:36are also...
02:37have more perceived value today than they did just a few years ago.
02:40Yeah.
02:41It'll be interesting to see whether they lean a little bit deeper into that.
02:43We do want to talk a little bit more about the fashion side...
02:45the business.
02:46But before we get to that, Pauline,
02:47I do have to ask you about,
02:48uh,
02:49the drinks,
02:50the spirits,
02:51uh,
02:50wine part of the business.
02:51I mean,
02:52there was a great story in the Bloomberg terminal about, uh,
02:54cognac makers not just...
02:55sell VMH,
02:56but writ large are basically sitting on huge amounts of inventory.
02:59You have farmers ripping out vines.
03:00over there in France because they can't sell.
03:02I am curious,
03:03when you look at the drop that we've seen in sales...
03:05of some of those products,
03:06specifically at LVMH,
03:07is that
03:08truly a function of what we're seeing?
03:10when it comes to tariffs and geopolitics,
03:12or is this a more of a long-term structural...
03:15shift in consumption trends?
03:17Yeah,
03:18it's both.
03:19It's both.
03:20The...
03:20the, um,
03:21hardest challenge for LVMH when it comes to this segment
03:23is the fact that younger people are...
03:25not drinking...
03:26nearly at the level that they were just half generation ago.
03:29Um,
03:30and...
03:30time will tell whether they can ever get that back.
03:32I tend to think some of the sea change that we've...
03:35seen toward non-alcoholic spirits,
03:37um,
03:38toward,
03:39um,
03:40sober...
03:40sober,
03:41curious living.
03:42I tend to think we're not going to go back.
03:43Um,
03:44and if...
03:45if...
03:45the, uh,
03:46that generation does go back,
03:47I don't know that they're going to go to Champagne or Cognac.
03:49So I think you have...
03:50a, um,
03:51a consumer shift,
03:52um,
03:53in terms of mentality and attitude...
03:55toward the segment.
03:56And of course you have,
03:57uh,
03:58the,
03:59the effect of,
04:00um,
04:01of the tariffs...
04:00and,
04:01and you have a pullback on,
04:02um,
04:03on high-end spending,
04:04especially from aspirational consumers.
04:05So you've got a lot of things coming together at the same time.
04:07Yeah,
04:08and there's been a lot of talks I'm investing...
04:10the investors saying that maybe they would be wise to maybe spin off that business.
04:13That's a conversation for another time, but...
04:15I do want to get your thoughts on kind of the core fashion business.
04:18I mean,
04:19this is a company that...
04:20uh,
04:21some of its houses,
04:22it has,
04:23uh,
04:24new leadership to try to reinvigorate some of the legacy...
04:25uh,
04:26I believe it finally,
04:27uh,
04:28sort of,
04:29uh,
04:30kind of solidified its ownership,
04:31its full ownership...
04:30Laurel Piano,
04:31which has actually been performing pretty well here.
04:32What is,
04:33if at all,
04:34any bright spot that...
04:35that you see in the fashion and clothing side of this business?
04:38Well,
04:39the...
04:40the bright spot is not so much a spending one as a,
04:43um,
04:44uh,
04:45I would say a...
04:45marketing one.
04:46The fact that there are so many houses right now that have new...
04:50designers,
04:51not just the ones with an LVMH,
04:52but if you just take with an LVMH,
04:54you have...
04:55you have...
04:56you have Dior,
04:57um,
04:58and you have,
04:59uh,
05:00some of the smaller brands like Celine.
05:00You have Fendi.
05:01You have,
05:02um,
05:03and they're all now being sort of infused with new energy.
05:05Um,
05:06and that makes them editorially friendly.
05:08There's a lot of,
05:09uh,
05:10social media...
05:10uh,
05:11there's a lot of more intersectionality between what we're seeing in Hollywood with...
05:15the red carpet,
05:16what we're seeing at the shows as recently as this week in Paris.
05:19So...
05:20we're certainly seeing a level of interest that I haven't seen for a couple of years.
05:25Um,
05:26the real challenge is,
05:27does that convert into sales?
05:28Mm.
05:29And,
05:30in most cases...
05:30if it doesn't convert into sales that are ready to wear,
05:32it'll more likely convert to sales of handbag or in the case...
05:35of Dior into perfume,
05:36into lipstick.
05:37If it does not convert,
05:38these are very,
05:39very expensive...
05:40marketing strategies,
05:41uh,
05:42that are not gonna help that particular division,
05:44which is a very important...
05:45consumer for LVMH,
05:46uh,
05:47move forward.
05:48So that's,
05:49uh,
05:50that's something we probably won't know.
05:50for a few quarters,
05:51um,
05:52but it's something that people will be watching very carefully.
05:54Well,
05:55this Disney...
05:55just to think about how many different brands fall under the LVMH umbrella.
05:59A well-dived...
06:00diversified portfolio,
06:01if you will.
06:02I wanna go to this line in your notes that,
06:03you know,
06:04when you're talking about...
06:05LVMH,
06:06different advantages.
06:07Uh,
06:08you mentioned the divorcifications,
06:09but you...
06:10also mentioned the Sephora hedge.
06:12Walk us through that a little bit.
06:14Yeah.
06:15Yeah.
06:16Yeah.
06:17Yeah.
06:18Yeah.
06:19Yeah.
06:20Yeah.
06:20So you...
06:21John,
06:22you...
06:23John Hedges...
06:24John,
06:25John,
06:26John,
06:28John...
06:29John...
06:31John,
06:32John,
06:33John,
06:34John.
06:35John,
06:36John,
06:37John...
06:38John,
06:39John...
06:15Well, most people don't realize just how big a division it is.
06:18It's not as profitable as the others.
06:20In part because retail and retail are third-party brands.
06:25It really is as profitable as a vertical integration, but it is a big one.
06:29And unlike the.
06:30It is truly a mass business.
06:32If you look at a Sephora shopper in the U.S.
06:35They're not that different than a target shopper.
06:38They may spend differently.
06:40Sephora as opposed to even how they spend in the beauty aisle in Target.
06:43But it.
06:45It is every woman.
06:46So, number one, from an economic standpoint, it's.
06:50Pretty diverse.
06:51And then number two, it skews much younger than many of the other divisions.
06:55Particularly the Wine and Spirits and the Watchers and Jewelry.
06:57And so it's the one area of that group.
07:00that they can still be relevant among a next generation.
07:03Hey, Pauline, before we let you go, I do just have to.
07:05Get your thoughts here on the struggles going on right now with the SACS empire, SACS team.
07:10Does this become a problem for LVMH and some of the other luxury.
07:15Brand houses that you have, at least for right now, what appears to be potentially the law.
07:20Or at least the erosion, to a certain extent, of one of the bigger retail.
07:25Outlets for those brands.
07:27Yeah, well, it's not good news.
07:28That's for sure.
07:29But if you look at.
07:30The list of the top 10 creditors, vendors that are now creditors.
07:35of a now bankrupt retail enterprise.
07:40LVMH is not at the top of the list.
07:42And part of the reason for that is that because they've had.
07:45More leverage than some of the smaller players that they've made sure as long as they were selling to.
07:50And through SACS and Neiman's that they were getting paid in more reasonable time frames.
07:55So the real crushing effect here is going to be on the small players.
08:00The ones that depended on wholesale for viability for many, many.
08:05years while predating this bankruptcy, LVMH and some of the other large.
08:10larger ones have been going more and more direct in terms of opening their own stores.
08:14So the dependency is.
08:15It's not as steeped as well.
08:18But when I say it's not good news.
08:20It's not good news because it's not good news for the consumer.
08:22The consumer really likes to shop.
08:25In multi-brand environments as opposed to monogrand.
08:28And.
08:30And they don't like to shop online
08:31for this particular category,
08:33particularly for Ready or Ready or Ready or Ready.
08:35They're perfect shoes as well.
08:36People like to try things, to feel how it is, how it fits.
08:40They like to see it up close.
08:42They like to feel the leather on the back.
08:44And so,
08:45the industry still does depend on retail.
08:47The consumer still depends on multi.
08:50And let's hope for the American consumer
08:53and for the industry that Sachs is going to be in place.
08:55And demons can pull through this.
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